PPS Post Properties, Inc. (delisted)

Equity Residential (EQR), a leading real estate investment trust (REIT), reported fiscal 2011 first quarter funds from operations (FFO) of $176.9 million or 56 cents per share, compared to $149.0 million or 49 cents per share in the year-ago quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

The reported FFO for first quarter 2011 was in line with the Zacks Consensus Estimate. Total revenues during the quarter were $520.6 million, compared to $465.0 million in the year-earlier period. Total revenues during the reported quarter were marginally above the Zacks Consensus Estimate of $520 million.

Equity Residential benefited from strengthening apartment fundamentals and superior execution of pricing and expense control measures. Management further expects to continue delivering strong growth in operating income and earnings in 2011 as well.

Same-store (first quarter 2011 vs. first quarter 2010 comparison, which includes 112,363 apartment units) quarterly revenues increased 4.0%. Same-store net operating income (NOI) during the quarter increased 7.3% year-over-year.

During the quarter, Equity Residential acquired two properties totaling 521 apartment units for $139.0 million at a weighted average cap rate of 5.7%. The company also acquired a commercial building spanning 97,000 square feet for $11.8 million. Equity Residential sold 12 consolidated properties during first quarter 2011 (2,731 apartment units) for $261.8 million at a weighted average cap rate of 6.7%.

During the quarter, Equity Residential offered 3.0 million shares at $50.84 each for total consideration of approximately $154.5 million. The proceeds were primarily utilized to repay debt. At quarter-end, the company had cash and cash equivalents of $306.1 million and total debt of $9.7 billion.

For full-year 2011, Equity Residential expects recurring FFO in the range of $2.40 to $2.50 per share. For second quarter 2011, recurring FFO is expected to be in the range of 53 cents to 57 cents per share.

We maintain our ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. However, we have an ‘Outperform’ recommendation and a Zacks #2 Rank (short-term ‘Buy’) for Post Properties Inc. (PPS), one of the competitors of Equity Residential.

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